3.3.2 Demand-side factors in global markets

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    Firms face difficulties when they operate on countries across the globe as they must be aware of the country’s culture and preferences when conducting business. These social differences are the different ways of communicating and expectations of behaviour held by different groups of people.

    This is important to firms as if firms do not adapt to the market conditions of the country, they are operating in they will be unsuccessful in growing their business. One important example of this how McDonalds has adapted their menu to not include beef and have more vegetarian options in India to allow for the religious tastes.

     

    BENEFITS OF AWARENESS OF SOCIAL/CULTURAL DIFFERENCES

    • Business deals will be successful in the long term
    • Reduce risk of failure when trading in a new country
    • Avoids misunderstandings which can lead to offence and loss of sales and (business deals).
    • Costly mistakes can be avoided
    • Better reputation for the business so higher certainty of sales due to customer sales

     

    An example of important details involved in business meetings in China include the following: importance of seniority, must hold business card with both hands and displays of emotion are not desirable.

     

    ISSUES WITH NOT BEING AWARE OF CULTURAL DIFFERENCES

    • Failure in markets abroad as product design and marketing decisions are taken to suit the firm’s own objectives rather than to suit the market
    • Sales expectations will be inaccurate as consumers may not respond as predicted
    • Brands and products may need adapting as they cannot rely on the existing marketing mix to sell in a new market

     

    As well as such cultural differences, there is also the factor of different tastes in different countries, for example Indian consumers may desire a spicier palate than Western consumers. Pizza Hut suffered in India when using their traditional Italian flavours but performed better when they introduced new items such as the ‘Tandoori Pizza’. Product designs must be adapted to suit the market and cultural values must be respected. Consumers in different cultures will also have different fashion styles.

     

    Information and communication factors are also important as language barriers can cause unintended or inappropriate meanings:

    • Firms have to avoid unintended meanings in advertising such as translated slogans. The slogan, ‘Pepsi brings you back to life’ was mistranslated as ‘Pepsi brings your ancestors back to life’ in China which obvious deterred consumers.
    • Firms must also avoid inaccurate or misleading translations of product names if they are translated literally e.g. the Chevy Nova did not sell well in Spanish-speaking countries as it translated as ‘won’t go’.
    • One way firms can circumvent this problem is through employing bilingual staff who have knowledge of both cultures.

     

    HOW FIRMS RESPOND TO THESE DEMAND SIDE FACTORS

    Firms can adapt strategies to target global niche and mass markets. A global niche market is one that is a smaller, more specialised part of a global market, the niche can be big or small e.g. Gatorade is a sports drink which is manufactured by PepsiCo and is distributed in over 80 countries. Cars and clothing are mass markets, but specialised cars and maternity clothes are niche markets within these larger markets. An example of this is Rolls-Royce which is a luxury car. Firms can differentiate their products to adapt to these markets. This connects to the concept of the long tail and not all businesses operating in global niche markets are large as many are SMEs.

     

    FEATURES OF A GLOBAL NICHE MARKET

    • Profit is a priority rather than market share
    • Product is often adapted or differentiated to suit customer needs not met by global mass market
    • More emphasis on product rather than price (goods are often more price inelastic)

     

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